Even small amounts can make a big difference to your retirement

You might be surprised how much difference small amounts saved today can make to your future finances. 

That’s particularly true when it comes to saving for retirement, when you may have many years - or even decades - to go before you’ll need the money. Nothing is certain when it comes to investing, but history suggests that money saved and invested into assets such as shares can achieve returns that beat inflation and add substantially to your savings overall. 

Here we model some examples of the difference that adding small extra amounts to your retirement saving can make to the retirement fund you can achieve. Plus, we’ll run through how bringing all your pensions together in one place will help you do it. 

The difference adding 1% can make

We wanted to see how much it might be possible to build by saving 5% of your earnings into a pension. Then, the difference you can make by adding an extra 1% and 2% of earnings to that amount. 

We imagine a person earning an annual salary before tax of £60,000. If they saved 5% of their salary into a pension they would be setting aside £250 a month towards their retirement - the blue line you can see on the chart below. This money we assume will then rise with investment returns of 5% after all fees. 

Then we modelled the effect of adding a further 1% of salary - a total of 6% of salary - and 2% - a total of 7% of salary - towards savings to see what difference this would make after 30 years of saving for their retirement.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before making your decision, please read our transfer guide Moving your investments to Fidelity, which explains the options available and gives you the important information you need to know about transferring investments. If you’re thinking about transferring a pension, please read our pension transfer factsheet. Pension transfers can be complex and some types of pension, in particular those with guaranteed benefits such as defined benefit schemes and pensions with safeguarded benefits, are not eligible for the cashback offer. Advised transfers are not eligible for the offer. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice.